Elder Law Report

I want to talk to you today about a problem many of my clients are facing. They want to protect their assets, including retirement funds, in a trust like an irrevocable or convertible trust. Many Americans have much of their savings tied up in traditional Individual Retirement Accounts (IRAs) or 401ks painting an asset picture that is “Qualified Fund Heavy”. That means their funds are locked in tax qualified funds like traditional IRAs or 401ks. These retirement savings products seem like a great idea at first.  They allow you to set aside money each paycheck, pre-income tax, and allows that money to grow. You are not taxed on the gains or in other words, there are no capital gains taxes on the growth of the investments inside of the IRA package. However, you are penalized 10% for any withdrawals you make prior to age 59 and you must start taking distributions from the IRA at the age of 72. The distributions from your qualified retirement assets can provide much needed income well into your retirement. Howeve